County Makes A Lansing Wish List

February 14, 2005
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GRAND RAPIDS — One of Kent County’s top three state legislative issues this year is to protect owners of the largest hotels in the county from falling under another lodging tax law.

“We don’t want our hotel operators to pay more than their fair share,” said Daryl Delabbio, county administrator and controller.

Part of that priority may also be to keep lodging tax receipts from falling further.

The issue revolves around the current lodging excise tax and a “sister law.”

Under the current method, local operators charge guests a 5 percent tax on their room bill. The county uses most of that revenue to fund the convention and tourism industry. In turn, promoting tradeshows and tourism draws paying customers to area hotels and motels.

Counties with a population of less than 600,000 can enact this lodging-excise tax, also known as the hotel-motel tax, and KentCounty falls into that category — for now.

The “sister” law in question is the State Convention Facility Development Act. Passed to help pay for the construction of Cobo Hall in Detroit, it lets hotel operators add a surcharge from 1.5 to 6 percent to a guest’s bill. The size of the surcharge depends on the number of rooms a hotel has. The larger the hotel, the higher the room tax is.

Only counties with a population of at least 600,000 can enact this law. Wayne, Macomb and Oakland currently are the only ones in Michigan large enough to be able to do so.

But projections for KentCounty put the county’s population over 600,000 by 2010, the next U.S. Census year. So county officials are planning to ask Lansing lawmakers to amend the convention facility act to exempt local hotel operators from that law when the total number of county residents tops 600,000.

The county feels that hotel operators who are collecting taxes under the existing method should be excluded from having to do the same under the “Cobo” law.

Under the convention facility act, hotels with 160 or more rooms add a surcharge of 6 percent to their guests’ bills. If enacted here, it would raise the local tax on the county’s largest hotels by 1 percent. But smaller hotels and motels are able to charge their guests a lower fee under that statute. So many hotels here could tack on a 3 percent surcharge instead of the current 5 percent, if the law isn’t amended when the county exceeds 600,000.

“This is not a critical issue,” said County Fiscal Services Director Robert White.

“We have five years to work on this.”

Becky Bechler of Public Affairs Associates, the county’s lobbyist, told members of the county’s Legislative Committee last week that Sen. Nancy Cassis of Novi opposed Kent’s effort to amend the convention facility act last year. Cassis, a Republican, chairs the Senate committee on tax policy.

Bechler said her firm would draft a new amendment and suggested that the county find a West Michigan legislator to sponsor a new bill. She recommended Rep. Dave Hildebrand as a candidate. Hildebrand, a Republican, was a Senate staffer before he began representing the 86th District, and Bechler said he has good ties with members of the Senate.

The county expects to receive about $4 million in lodging-tax revenue from last year, an amount based on a hotel-occupancy rate of 54.5 percent. Occupancy was slightly under 55 percent for 2004, with about 112,000 room nights being booked last year.

The lodging revenue made a bond payment on the

DeVos Place
convention center of $4.01 million in 2004. It also funded the Convention and Visitors Bureau, John Ball Zoo and the annual arts festival. Commissioners learned in October that they could expect excise-tax expenses to exceed revenue by $1.16 million in 2004.

And switching five years from now to the collection method used in metro Detroit could mean fewer tax dollars for the county, as a majority of operators would be charging guests 3 percent on their bills then instead of the 5 percent they charge now.

The county’s other top priorities at the state level are to limit the county’s medical liability for inmates and to get low-income households a deferment from the property tax bill due in July.

A third of the annual property tax is due this summer because state lawmakers amended the property tax act last year. Commissioners are concerned the payment-date change will be a hardship for low-income residents, as many might not have enough money set aside in escrow to pay that portion of the tax.

White said allowing these residents to defer their payments would not be a significant financial blow to the county, but could be a bigger hit for other groups receiving property-tax revenue. Bechler said she would check with Treasury officials to find out how they feel about the issue.

The county also wants state legislators to put a lid on medical expenses for inmates at the county jail and juvenile detention center. The county spends about $5 million on medical care for prisoners at both facilities each year.

A bill introduced in the state Senate last year that would have curbed a county’s medical liability for emergency care to $250 annually per inmate never made it out of committee. Bechler said Public Affairs would attempt to get a new bill introduced this session.

“I think we have an opportunity to reverse something,” said County Commissioner Dan Koorndyk, who chairs the Legislative Committee.    

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